PSI Oklahoma Real Estate Practice Test

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Prepare for the Oklahoma Real Estate Test. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Given an effective income of $150,000 and total bills of $64,000 and depreciation of $12,000, what is the property's pre-tax cash flow?

$74,000
$76,000
$78,000
$41,000

The correct answer is: $76,000

To determine the property's pre-tax cash flow, you'll need to start with the effective income and subtract both the total bills and the depreciation. First, the effective income is $150,000. Next, total bills amount to $64,000. While depreciation of $12,000 is accounted for in financial statements, it is a non-cash expense and does not directly impact the pre-tax cash flow calculation. Therefore, it should not be included in the cash flow calculation. Now, perform the calculation: 1. Subtract the total bills from the effective income: $150,000 (effective income) - $64,000 (bills) = $86,000 Since depreciation is a non-cash expense, you do not subtract it again. Therefore, the pre-tax cash flow equals $86,000, and it seems there might have been a calculation misunderstanding regarding the answer choices provided. Reviewing the calculations reveals that the correct pre-tax cash flow is indeed $86,000, illustrating the importance of distinguishing between cash and non-cash expenses in property financial assessments. If a choice reflected this amount, it would be the correct answer, emphasizing the need to clarify cash flow components accurately.